Our opinion on the current state of CMH

Combined Motor Holdings (CMH) runs car dealerships in Nissan, Volvo, Toyota, Opel, Subaru, Lexus, Mazda, Isuzu and Ford - selling both new and used vehicles. The motor industry is especially affected by the state of the economy because consumers can usually keep their vehicles on the road for longer in recessionary times. The company is planning to cut its car rental staff by as much as one third, its fleet by 40% and 20 of its branches because of COVID-19. Electricity disruptions from Eskom and low business confidence have negatively impacted the business. The car hire business has been recovering steadily. In its results for the six months to 31st August 2023 the company reported revenue up 7,7% and headline earnings per share (HEPS) down 12,9%. The company's net asset value (NAV) was up 7,9% at 1687c per share. The company said, "The drive to increase new unit sales in an effort to earn manufacturer volume incentives, and the passing on to customers of discounts received from those manufacturers, squeezed the gross profit margin slightly, from 19,7% to 19,2%". Technically, this share made a "V-top" at 3350c on 10th May 2018 and then fell heavily to around 950c in May 2020 as a result of COVID-19. We recommended waiting for a break up through its long-term downward trendline - which came at 1489c on 2nd February 2021. Since then the share has risen steadily to 2765c where it is on an undemanding P:E of 4,48. In our view, it represents good value at these levels.